The Inside Edge
Stamp duty, or Stamp duty land tax (SDLT) to give it its full title, has a very long history. This tax was first introduced in the UK in 1694 although its roots can be traced back as far back as the sixth century and the Roman Empire. Stamp duty can be levied on property, but also shares too. It’s always been a relatively obscure tax and was always ‘just there’ and nobody really bothered much about it.
That is until 1997 when the Chancellor at the time, Gordon Brown, discovered its true potential. Rates were quickly inflated especially on property purchases. Back then stamp duty netted about £2.5b each year. Today it rakes in almost £9b!
If you are searching for a new home it’s important to understand stamp duty or at the very least how much you’ll be expected to pay. There is good news and bad news where this property tax is concerned.
The HMRC has set stamp duty thresholds in a bid to make the taxing of homebuyers a fairer system. Those buying a home with a value up to £125,000 will have zero stamp duty to pay. However, if you were to find a property for £126,000, you would be charged 1% stamp duty on the entire property value and not just the 1K difference. This threshold rises for first-time buyers to £250,000.
If you are looking to buy a home costing more than £250,000 you will most definitely have to pay stamp duty. Seasoned homeowners looking to buy a home costing between £125,000 and £250,000 will pay 1% of the purchase price in stamp duty, and this threshold continues to rise by 1% and is capped at 5% for homes costing over £1 million.
Another way to avoid paying SDLT is to purchase a brand new zero-carbon home and the threshold on this type of property is £500,000. The initiative applies to all homes purchased before 30 September 2012.
So, whilst you might not avoid SDLT altogether, it’s helpful to know how much you will be charged. Once you have found the house of your dreams and put in an offer, your solicitor will send you a statement showing exactly how much stamp duty you will owe. This amount is taken at the time of purchase with everything handled by your solicitor.